COBS 4.7 Direct offer financial promotions

1. (1)

   Subject to (3) and (4), a firm must ensure that a direct offer financial promotion that is addressed to, or disseminated in such a way that it is likely to be received by, a retail client contains:

   1. (a)

      such of the information referred to in the rules on information disclosure (COBS 6.1.4 R, COBS 6.1.6 R, COBS 6.1.7 R, COBS 6.1.9 R, COBS 14.3.2 R, COBS 14.3.3 R, COBS 14.3.4 R and COBS 14.3.5 R) as is relevant to that offer or invitation; and

      [Note: article 29(8) of the MiFID implementing Directive, the rules listed implement Articles 30 to 33 of the MiFID implementing Directive]

   2. (b)

      if it does not relate to MiFID or equivalent third country business, additional appropriate information about the relevant business and relevant investments so that the client is reasonably able to understand the nature and risks of the relevant business and relevant investments and consequently to take investment decisions on an informed basis.

2. (2)

   This rule does not require the information in (1) to be included in a direct offer financial promotion if, in order to respond to an offer or invitation contained in it, the retail client must refer to another document or documents, which, alone or in combination, contain that information.

3. (3)

   3If a communication relates to a firm's MiFID or equivalent third country business, this section does not apply:3

   1. (a)

      to the extent that it is a third party prospectus;

   2. (b)

      if it is image advertising.

4. (4)

   3If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:3

   1. (a)

      to the extent that it is an excluded communication;

   2. (b)

      to the extent that it is a prospectus advertisement to which PR 3.3 applies;

   3. (c)

      if it is image advertising;

   4. (d)

      to the extent that it relates to a deposit that is not a cash deposit ISA or cash deposit CTF;

   5. (e)

      to the extent that it relates to a pure protection contract that is a long-term care insurance contract.

5. (5)

   In this rule, in relation to MiFID or equivalent third country business,2 ancillary services are to be regarded as relevant business.

1. (1)

   2A firm must not communicate or approve a direct offer financial promotion:

   1. (a)

      relating to a warrant or derivative;

   2. (b)

      to or for communication to a retail client; and

   3. (c)

      where the firm will not itself be required to comply with the rules on appropriateness (see COBS 10);

   unless the firm has adequate evidence that the condition in (2) is satisfied.

2. (2)

   The condition is that the person who will arrange or deal in relation to the derivative or warrant will comply with the rules on appropriateness or equivalent requirements for any application or order that the person is aware, or ought reasonably to be aware, is in response to the direct offer financial promotion.

1. (1)

   5Unless permitted by COBS 4.7.8 R, a firm must not communicate or approve a direct-offer financial promotion relating to a non-readily realisable security to or for communication to a retail client without the conditions in (2) and (3) being satisfied.

2. (2)

   The first condition is that the retail client recipient of the direct-offer financial promotion is one of the following:

   1. (a)

      certified as a ‘high net worth investor’ in accordance with COBS 4.7.9 R;

   2. (b)

      certified as a ‘sophisticated investor’ in accordance with COBS 4.7.9 R;

   3. (c)

      self-certified as a ‘sophisticated investor’ in accordance with COBS 4.7.9 R;

   4. (d)

      certified as a ‘restricted investor’ in accordance with COBS 4.7.10 R.

3. (3)

   The second condition is that firm itself or the person who will arrange or deal in relation to the non-readily realisable security will comply with the rules on appropriateness (see COBS 10) or equivalent requirements for any application or order that the person is aware, or ought reasonably to be aware, is in response to the direct offer financial promotion.

5A firm may communicate or approve a direct-offer financial promotion relating to a non-readily realisable security to or for communication to a retail client if:

1. (1)

   the firm itself will comply with the suitability rules (COBS 9) in relation to the investment promoted; or

2. (2)

   the retail client has confirmed before the promotion is made that they are a retail client of another firm that will comply with the suitability rules (COBS 9) in relation to the investment promoted; or

3. (3)

   the retail client is a corporate finance contact or a venture capital contact.

5A certified high net worth investor, a certified sophisticated investor or a self-certified sophisticated investor is an individual who has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the terms set out in the applicable rule listed below, substituting “non-readily realisable securities” for “non-mainstream pooled investments”:

1. (1)

   certified high net worth investor: COBS 4.12.6 R;

2. (2)

   certified sophisticated investor: COBS 4.12.7 R;

3. (3)

   self-certified sophisticated investor: COBS 4.12.8 R.